LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
Six years after issue, an insurer discovers a non-fraudulent error in the answers on a client's application. The insurer may:
- Asuspend coverage until the client has completed a fresh application and examination
- not rescind on that basis, because the contestability period has long since expired
- Crescind the contract, since a misstatement always entitles the insurer to that remedy
- Drescind if the error would have led to a higher premium being charged at issue
Correct answer: B) not rescind on that basis, because the contestability period has long since expired
After the contestability period, only fraud and the misstatement of age provision remain available. An innocent error in the answers cannot be used to rescind a policy that has been in force beyond that period.
Why the other options are wrong
- AAn insurer cannot suspend coverage and demand a new application.
- CThe remedy is limited once the contestability period has run.
- DThe premium consequence does not reopen a contract beyond contestability.
Exam tip
After contestability, only fraud and misstatement of age survive.
Common mistake
Applying contestability remedies to a policy long past the two-year mark.
What this tests
CISRO competency component 1.3 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.